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Why Bihar should get more funds in the 15th Finance Commission?

15th Finance Commission (FC) like its predecessors will recommend how vertical and horizontal devolution of tax revenue should be. In the vertical devolution, finance commission recommends how the revenue collected through tax should be divided between centre and states. On the other hand, in the horizontal devolution of funds, it recommends how the funds which is recommended for states should be distributed among different states.

If we look at the last three recommendations, in vertical devolution the state’s share has increased every time. The 12th FC recommended 30.5% share to states and 13th FC increased it to 32%. The 14th FC was more generous towards states and recommended 42% share to the states. If we look at the distribution of funds among states and take the example of Bihar, it received 11%, 10.9% and 9.6% share in 12th, 13th and 14th FC respectively. Each time the share of Bihar decreased.

The more funds a state has at its disposal, they can spend more money on developing infrastructure and carry out other development related work. There would not be any difference of opinion if I say that regional disparity is affecting India’s overall growth story. States which were better off were benefitted more post liberalisation period. Blame it on politics or geographical advantage some states have, but if we want India’s growth to be more equitable and inclusive we must focus on states which are at the bottom as well as which do not have any geographical advantage.

Bihar being the 3rd most populous state in India deserves special attention. The HDI of Bihar is 0.566 (2018), well below India’s HDI 0.639 (2018). The HDI of Bihar is worse than most of the low-income countries like Nepal, Myanmar, Cambodia, East Timor and the Republic of Congo. India ranks 130 in terms of HDI, and if it needs to improve its ranking, states like Bihar will need special focus and adequate funding.

If we look at the statistics in a more detailed way, agriculture contributes 22% to Bihar’s GDP but it employs 80% of its population. The income (INR) per HH from agriculture is 3,558 compared to 18,059 in Punjab. Sadly, Bihar is highly disaster prone and is frequently affected by floods and droughts. Guess, who it affects the most: the farmers, who constitute 80% of the state’s population.

Bihar has the worst employment figures in the country. Labour force participation per 1000 as per the NSSO (2011-12 report) in Bihar is 284 in rural and 267 in urban against the national average of 406 in rural and 367 in urban. A World Bank report (2016) states that female labour force participation in Bihar is merely 9% which is lowest in the country. The reasons could be attributed to low enrolment rate of girls in secondary level and beyond. How can we expect development to take place if half of the population of Bihar is not contributing towards its GDP?

Only 12% (approx.) of the population of Bihar lives in urban areas, which is the lowest in India after Himachal Pradesh. It’s time to introspect, why is it so?

The Credit Deposit Ratio of Bihar is 32% as compared to India’s average of 73.8%. Low CDR means banks are not making full use of their resources. The reason for this could be many, and a matter for further research, but no one would dispute that it has resulted in less investment and low job creation. Not a sign of a healthy economy.

Bihar received mere 94 crore of CSR expenditure (2016-17, National CSR Portal) compared to Maharashtra which received 2,222 Crore out of total CSR expenditure of 13465 crores (INR). Bihar even lags behind in the CSR expenditure which should be focussed more on states that need it most. Migration is in our blood. We need to migrate for almost everything, be it education, employment, better lifestyle etc. Recently, we all have heard the news of violence against Bihari workers in Gujarat. Bihari has become a synonym to the migration, not only in India but abroad too. When I was being introduced to a professor at Humboldt University (Berlin), I told him, I am from Bihar and his sudden reaction was, “Ah, Biharis are everywhere”. Well, he meant it positively, that Biharis are hardworking and excel wherever they go but that’s not the intention in every case.

So, what needs to be done? “We need to create Agricultural Special Economy Zones as a large part of our population is dependent on agriculture. We need a comprehensive plan and significant investment to employ people coming out of agriculture as well as to create a source of secondary income for farmers.” Says Nitish Mishra, Vice President of Bihar unit of BJP and who served as Rural Development Minister in previous NDA government in Bihar. He is right. We need to cash in on agriculture and develop agro-based industries. This will have a multiplier effect on Bihar and ultimately on the country. But, to do so, Bihar needs funds to develop its infrastructure like electricity, roads and a special policy to develop Micro Small and Medium Enterprises.

15th Finance Commission must take into account these factors and allocate more funds to the state which needs it the most – Bihar.